Beware of State Legislation Pitfalls

A nonprofit charity that solicits funds in states other than its home state must register in most of those states (42 at last count). So do most fundraising agencies. This is unlike almost any other business, which does not have to register unless it is physically present in a state. The rules are complex and ever-changing. An attorney estimated that annual fees approach $10,000 when you add them all up. Here's a new report from the Direct Marketing Association's Nonprofit Federation (DMANF) on a recent development in Arkansas:

"Arkansas Attorney General Mike Beebe issued written opinion on August 29th stating that a nonprofit organization that solicits contributions from persons on the Internet without registering, pursuant to A.C.A section 4-28-402 has committed a criminal offense, and that certain key persons, corporate officers of the nonprofit could be held liable if they acted "knowingly and willfully" to violate the registration requirment.

"States increasingly seek to establish that a mere contact via the Internet is a sufficient contact to claim jurisdiction over an out-of-state charity, a tenuous connection at best in many instances. The DMANF is reviewing his memorandum."

Turning a failure to file paperwork into a crime is a disgrace.

Another item to note from the DMANF:

"NY AB 7013 & SB 4106: Mandates do not mail/call/email list. Each organization must maintain its own and must check the list that the State of NY will create. This would impose a tremendous burden on nonprofits. The bill is not specifically aimed at nonprofits, but the definitions of "individual reference service provider" (proposed N.Y. Gen. Bus. Law Art. 32-A § 676.6(B)) and "marketing list broker" (proposed N.Y. Gen. Bus. Law Art. 32-A § 676.6(C)) are drafted so broadly that they will likely encompass most nonprofits. The provisions of the act are quite onerous. Not only must an organization set up a toll-free line to accept opt-out request, but: such requests must be honored within five days; detailed notice must be given to everyone remaining on the list each time their name is shared; and organizations must provide a copy of all information on file for an individual upon demand."

Stay on top of these events at the DMANF's web site.